Comment on Net Zero Review

Comments:

Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit commented: “The current gas crisis is costing the UK tens of billions of pounds and is a reminder of how our dependency on gas leaves us at the whim of foreign powers. Lack of progress on net zero technologies such as onshore wind and home efficiency are only adding to the bill for both British households and taxpayers.

“As the US and EU invest heavily in new net zero industries, the question for the UK is will it let itself get left behind in the global race to develop cleaner car, steel and renewable industries?”

Colin Walker, Transport Analyst at the Energy and Climate Intelligence Unit commented: “EVs can save households almost £800 a year, and remain almost 3 times cheaper to fuel than their petrol equivalents. A ZEV mandate could speed the supply of electric cars in the UK in turn boosting the second-hand market enabling these savings to be shared by more people. It would also provide a strong signal to further private investment in the charging network and EV manufacturing and secure more high-paying jobs.”

Gareth Redmond-King, International Energy Analyst at the Energy and Climate Intelligence Unit commented: “Not one out of 32 studies conducted on home heating concluded that hydrogen would be a viable low-carbon replacement for gas. The review is clear that government needs to re-evaluate the economics, particularly the role of blue hydrogen which is made using gas, the price of which is set to remain high.

“While the UK has strengths in green hydrogen it looks to be falling behind Europe and other countries in its ambition. Will the government make this a priority to claim a share of the expanding global market?”

Additional context:

On costs…

• The Treasury’s Net Zero Review (2021) found that “a successful and orderly transition for the economy could realise more benefits … than an economy based on fossil fuel consumption” and that “the costs of global inaction significantly outweigh the costs of action”.
• If high gas prices remain, the Climate Change Committee (CCC) is now predicting that the transition to net zero would be a net 0.5% GDP benefit to the UK economy by 2035: “we estimated that our Balanced Pathway would result in a cost of less than 1% of GDP in 2035. We find that our Balanced Pathway would result in a cost saving (compared to a high-carbon scenario) of 0.5% of GDP under sustained high gas prices.”
• In its recent ‘Costs of NOT zero’ report, the ECIU found that if the UK had not delayed in deploying renewables, insulation, rooftop solar panels, heat pumps and electric vehicles, some households could have saved around £1,750 on bills in 2022. Plus, homes are facing more than £400 extra in food bills this year because of the impact of climate change and oil and gas prices on the farming and food system. This amounts to a potential £2,150 added to household bills.

On home heating…

• The UK has some of the worst energy efficiency in Europe – for example, for every 1C of heat a German home loses, its UK equivalent loses 3C.
• Good fabric efficiency (i.e. having wall and loft insulation) will improve the efficiency of all types of heating systems, as less heat is being wasted, and will lower bills.
• The UK has a high dependency on gas due to poor home insulation, using gas for 40% of our power generation, and 85% of home heating. A report by the International Monetary Fund (IMF) last summer showed that the cost impacts of the gas crisis are worse for households in the UK than in any other country in Western Europe.
• A recent government study found that all homes in the UK, “from Victorian mid-terraces to pre-WWII semis and a 1960s block of flats”, are suitable for heat pumps.
• Heat pumps are over 3x more efficient than gas boilers and in 2022 could have saved the average household (with decent energy efficiency at EPC band C) around £140.
• The Heat Pump Association has stated that in 2021 alone, 69,000 heat pumps were sold in the UK. This year, the Association expects that more than 170,000 will be installed.
• There are several heat pump manufacturers in the UK; Vaillant in Derbyshire, Mitsubishi Electric in Livingstone, Scotland, and Kensa in Cornwall.
• There are currently 140,000 gas safe engineers (gas boilers installers), which have key knowledge on heating engineering and could be easily upskilled to install heat pumps.
• There are currently 3,000 heat pump engineers in the UK. Octopus Energy will train 1,000 green heat engineers per year and Heat Pump Association members can train over 7,000 installers per year the UK.
• The UK is already lagging behind most European countries when it comes to heat pump installation, coming joint last for heat pump sales out of 21 nations. At the top of the ranking were Norway, Finland and Estonia. France has increasing numbers of installs at over 8.6 million in 2020, an increase of over 3.9 million since 2015.

On transport...

• As the review highlights, the rapid uptake of EVs is one of the UK's success stories in moving to a zero-carbon economy. The transition to EVs promises many other benefits, including opportunities for UK businesses worth billions of pounds, the creation of tens of thousands of jobs, and the delivery of significant financial savings to households across the country.
• Realising these benefits requires regulatory certainty and long term planning and commitment. One of the review's recommendations is the introduction of a ZEV mandate in 2024. Rising targets for the minimum percentage of cars sold in the UK that are electric provides a sense of demand. This gives businesses the confidence to invest in the gigafactories the UK needs to remain a major car manufacturer, and to roll out the charging infrastructure needed to keep up with demand.
• And in setting ambitious targets, the greater the number of new EVs that appear on our roads, and the sooner these cars appear on the second hand market - ensuring lower income households are able access all the benefits and savings that come from EV ownership.

On hydrogen…

• In 2022, a review of 32 separate studies on using hydrogen for heating concluded that there are too many technical barriers to make it a viable low-carbon fuel for replacing natural gas.
• Heat pumps are more efficient – three-five times more – than gas boilers, the International Energy Agency (IEA) have shown, meaning less energy is needed for the same level of heating.
• Government is consulting on all UK boilers being ‘hydrogen-ready’ by 2026 but the hydrogen strategy suggests there would only be enough low-carbon hydrogen for 10% of heating demand, and not until the mid-2030s; most H₂-ready boilers would go their lifespan not using hydrogen.
• In 2020, Germany committed €9bn for green hydrogen projects compared to a few hundred million pounds with the UK’s strategy.
• REPowerEU plans accelerate EU hydrogen deployment, committing to produce 10m tonnes, and import 10m tonnes of green hydrogen by 2030 (up from 5.6m tonnes in 2021 plans). UK’s total would be about 13% of the EU’s, with as little as half the UK’s being from green hydrogen alone.